From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

In today’s Commodity Report, we zoomed out to our monthly charts to reconnect with the primary trend. This exercise really allows us to tune out the noise on the weekly and daily charts.

As we were reviewing our charts, there was one recurring theme that kept popping up...

Pullbacks and retests.

The CRB Index retested its breakout zone near the 2018 highs ~206. 

Crude oil broke back below a 13-year downtrend line only to reclaim it in recent sessions. 

Iron ore fell right back to check in on its 2013 highs. 

And even palladium, the one bright spot in the precious metals space, pulled back to a six-year trendline. 

But guess what? Just like we’ve recently seen in many of the weakest areas in other asset classes, buyers dug in at these key levels.  

Of all these retests, one that stood out most was Uranium. 

Let’s take a look.

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

Pockets of strength continue to emerge within commodities.

This could be hard for some to believe when we see things like energy chopping beneath overhead supply.

Or the fact that precious metals persist in slumming it as some of the worst-performing assets on the planet.

But this is a diverse asset class with plenty of bright spots that suggest strength and support our thesis of a new commodities supercycle.

We’ve recently covered breakouts in Sugar and Feeder Cattle that are both still in play.

Even some of the laggards, like Silver and Lumber, recently defended critical areas of support.

This week, it was impossible to miss the chart of Oat futures. Let’s have a look!

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

It’s been a routine hurricane season down here so far this year. Things have picked up lately, and we’ve had a few close calls over the past week. 

But storms aren’t just brewing in the Atlantic...

It’s also beginning to look dicey in the commodities market, with lots of “close calls” these days.

Strong headwinds such as the rising dollar have hit some of the most important procyclical assets this week. Apparently, there’s some geopolitical stuff going on, too. Then again, when isn’t there? 

Let’s discuss what we’re seeing and try to determine just how likely these winds could evolve into a major storm for commodities.

Energy, base metals, precious metals, and ags have either pulled back from recent highs or have broken critical levels of support.

Given that many areas have experienced near parabolic advances during the past year, a corrective phase would be a healthy and welcome development. It makes total sense for commodities to digest their monster gains at current levels. And remember, sideways is always an option.

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley    

Rotation is the lifeblood of any bull market.

If a sustained uptrend is going to persist, then we need to have broadening participation... or at least some healthy rotation.

And that’s exactly what we're seeing within commodities right now. 

As the energy group chops sideways and base metals hang tough, we’re starting to see signs of strength from one of the worst-performing areas over the past year.

Softs.

Like livestock last week, it appears this group of commodities are ready to play catch-up as they turn the corner and head higher. 

Considering the fact that other groups are simply consolidating or correcting through time instead of price, we'd argue that this looks more like an expansion in participation rather than rotation. But it's really just semantics. It's all bullish at the end of the day. Let's dive in.

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

Breakouts continue to emerge left and right within the commodity space as participation expands to more and more subgroups. 

One of the areas that’s had our attention lately is Livestock. Last month, we highlighted lean hogs. 

And while they’ve since fallen back below our risk level, we’re now seeing cattle futures attempt to break higher from a similar base.

Let’s dive in and outline some long setups in these livestock futures as they’re offering a favorable risk/reward at current levels...

First up is a weekly continuation chart of Feeder Cattle futures:   

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

We can’t ignore the resiliency in base metals. 

Despite the classic year-two chop, base metals have remained buoyant while many other risk assets have come under pressure. They’ve even gained ground during the recent bout of US dollar strength. 

And now we’re beginning to see signs of serious leadership emerge as Crude Oil consolidates its recent gains. The broad-based strength beneath the surface for this procyclical group of commodities has been undeniable. These risk-on metals have been the steadiest performers within the entire asset class for the better part of this year.

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

The markets are a mess and have been a mess for months now.

Risk assets are under pressure as the USD strengthens and overhead supply thwarts potential rallies.

Yet, we continue to find pockets of strength in both stocks and commodities.

We’ve said it time and time again during the past several months...the markets are a bifurcated, choppy mess! 

But during these challenging periods, identifying areas that are bucking the trend can prove valuable over intermediate- and longer-term timeframes.

Basically, the assets holding up the best or even breaking out while the broader market is trendless are likely to be your future leaders.

Let’s take a look at one area of the market doing just that!

Here’s a chart of the ASC Green Revolution Index: 

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

Opportunities are springing up in the commodity space!

Yes, energy, base metals, and (especially) precious metals continue to consolidate below overhead supply.

But this doesn’t necessarily speak to weakness… 

In fact, much of the sideways chop in commodities is taking place at logical levels of resistance. And aside from the dramatic sell-off in lumber, we see more upside resolutions than violations of critical support levels.

We recently pointed out that base metals managed to hang tough in the face of a significant correction in copper. And this week, tin is breaking out to new all-time highs.

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

Overhead supply is a theme we're seeing all over these days. And this isn't just true for the stock market, but it's also dominating the commodity landscape.

Crude Oil reached our objective of 76 and turned lower. Copper remains stuck below its former 2011 highs. And Gold has been an absolute mess since peaking last August.

Even the few commodities that have recently broken above resistance zones -- such as Gasoline and Heating Oil -- have yet to follow through and confirm their new highs in any meaningful way.

Remember, commodities have enjoyed some explosive moves over the past year. Now, many are at logical levels to pause and digest recent gains. This is healthy stuff. Normal market behavior.

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

June is officially in the books!

Now, it’s time to dig into a fresh batch of monthly candles…

As everyone prepares to celebrate over the long weekend, we’re pouring over our monthly charts to reconnect with the primary trend.

And we witnessed some key developments in the commodity markets in June that are hard to ignore:

• Lumber was down almost 45%
• Copper was down 8%
• Natural Gas was up 24%
• Crude Oil was up 10%

Tumbling lumber futures and copper’s failure to hold above its former 2011 highs raised caution for risk assets.

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

Crude Oil has been the Lone Ranger within the energy complex since early June, relentlessly pushing to new highs while other energy-related commodities have been stuck below overhead supply.

But that’s all changing this week as Heating Oil and Gasoline just broke above key resistance levels to new multi-year highs.

The recent strength from Energy also comes as Base Metals continue to cool off and correct. Copper, Tin, and Aluminum are all rangebound below logical levels of resistance after explosive moves off their 2020 lows. This is yet further evidence of the bifurcated market environment we're in right now. All we can do is focus on finding opportunities in areas that are trending... So, let's talk more about Energy.

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

Whether you trade commodities or not, it’s been impossible to ignore the recent sell-off in Lumber, as prices have collapsed almost 30% in just the last month.

We pointed out in May that Lumber was due for a digestion of its recent gains.

Well, let’s just say we got a lot more than that! Sometimes markets correct or consolidate through time, and sometimes they correct through price.

And Lumber is most definitely correcting through price!

But Lumber is not the only procyclical commodity to enter a corrective phase. More recently, DR. Copper has begun to digest its recent gains through price as well.

These corrections have already done some damage to the primary uptrends at play as both of these economically sensitive commodities have recently violated critical support levels.